U: We’re going to have to collect huge amounts of information on who’s living with whom. We’ve been doing that amongst the lower classes for years, but we’ll now have to do it for the wealthy as well. That will be interesting. And then we’ll have to connect that information with data on who’s paying higher rate tax, and on who’s receiving Child Benefit. Do you think we should ask the company which tried to computerize means-tested benefits if they can do it?

M: Shouldn’t it go out to tender?

U: Of course. I’ll see if anyone knows how to write a specification.

M: But do you think we need to do all that? Can’t we just ask Child Benefit claimants to tell us if they’ve got someone in the household who’s paying higher rate tax?

U: Yes, we could. But then we’ll need to check up on them. So we’ll need a wonderfully large fraud department, and we’ll need to train some more snoopers. Now that will be really interesting.

M: O dear, do you think so?

U: And we’ll need to collect millions of changes of circumstances every year. And we’ll need a department to look after underpayments and overpayments. We don’t have to worry too much about that at the moment.

M: Don’t HMRC have all that trouble with tax credits?

U: They do, Sir. I’m sure we could ask them to give us lessons. … And we’ll need tribunals, too. They take quite a bit of admin. So we’re really very pleased; and so are the unions, because we’ll be able to redeploy all the people we were going to have to get rid of.

M: I wonder if I should have a word with the Chancellor?

U: I think it was the Prime Minister’s idea, Sir. And they both thought it was a good one. But don’t worry. I’m sure we can manage it. I’ll have a note of the extra admin. costs for you by tomorrow so you can tell the Chancellor how much he won’t be saving.

M: It hope it won’t be too embarrassing.

U: I’m afraid it already is quite embarrassing, Sir. But at least we won’t need to employ consultants. We’ve all the all expertise we’ll need in the means-testing sections of this department, and in tax credits at HMRC.

M: I suppose that’s a help. … But the argument’s right, isn’t it? That it’s wrong for low earners to be paying for Child Benefit for the wealthy?

U: Of course, Sir.

M: Do you really think so? … You don’t, do you.

U: It’s as good as the argument that we should stop higher rate taxpayers using the NHS.

U: If I can speak in a personal capacity and off the record … It’s much more efficient to give Child Benefit to everyone. The wealthy are paying far more in tax than they receive in Child Benefit so there’s really no problem. But the Department rather you didn’t make that argument too clearly, Sir.

M: I can see that.

U: On the other hand, if you’re interested, there is another strategy. You could tell them how cheap Child Benefit is to administer and suggest that they turn tax credits into a universal benefit. But only do that if you can be sure that this department gets to run it. Which means that you’ll need to get the PM to understand, and not the Chancellor.

Female bullfighter's horse fell over with her underneath. The bull attacked her and the horse. She is in hospital with life threatening injuries. Includes a video of the event, very graphic. And yes I know that Marbella is not in Central Europe, but it would be a shame to omit this one.---------------------------Tyrol 13 October: Am Vormittag versuchte in Ebbs ein Jungbauer mit seiner Gattin die Kuh in den Stall zu treiben, um sie dort anzuhängen. Kurz vor der Stalltüre drehte sich die Kuh plötzlich um und überrannte den Altbauern, der ihr den Weg zu versperren versuchte.

I explained that UK companies could quite easily sort out their pension fund deficits with a series of circular transactions by which they all issue new bonds to each others' pension funds nearly three years ago. Real cash money would have to change hands (otherwise they don't get the corporation tax deduction), but this could be borrowed from the bank in the morning and repaid in the afternoon. As usual, the idea was much derided along the lines of "If it were that simple, why don't they do it?"

Once The Great Deleveraging got underway, I revised the plan to involve companies issuing shares rather than bonds, and I pointed out a few months ago that most of these companies with massive pension fund deficits, primarily privatised utilities, are worker owned co-operatives in economic terms.

One caveat I had always added was that there are limits on the number of shares in the sponsoring employer that a pension fund can hold (post-Maxwell rules), which is why plan would have needed co-operation and co-ordination between several different companies. It appears that even this is falling by the wayside and UK companies are taking the most direct course of action and handing themselves over to their pension funds lock, stock and barrel.

For several years, people with a slightly warped sense of humour have referred to British Airways as a giant pension fund black hole with small transport business attached. Now it looks likely that they can really describe Uniq as a pension fund that owns a small chilled-food business.

Pending regulatory clearance and shareholder approval, the biggest supplier of sandwiches to Marks & Spencer will issue new shares amounting to 90% of its equity in return for the pension fund wiping out a £436 million deficit. Existing shareholders will end up with just 10% of the equity...

So what can existing shareholders do? The simple answer is not a lot, because even 10% of something is worth more than 100% of nothing. Indeed some analysts reckon that once the pension deficit is sorted Uniq's stock market value should be about £72 million, which is nine times the £8 million it is valued at today. So they won't actually have lost too much.

These are two phrases that the conspiracy theorists like to bandy around - and our former Prime Minister popularised the expression shadow banking system in order to try and shift the blame - when I try to explain that the UK banking system is:• nowhere near collapse. I calculated net total cash inflows from mortgage and other lending at £136 billion a year back in 2008, which might be down to £100 billion by now, as interest rates have fallen,• would not go *pop* even if house prices fell by half, and• is in no need of taxpayer-funded subsidies (unless your aim is merely to re-inflate the credit and house price bubbles, which would require subsidies that are so huge that the golden goose, the productive economy, would be slaughtered).

The conspiracy theorists mutter darkly that all my calculations don't include 'off balance sheet finance' or 'the shadow banking system', therefore they won't work, without offering any sort of explanation of what they are talking about - are the UK banks hiding assets or hiding liabilities? what sort of sums are involved?

The whole point is that UK banks are not omitting assets or liabilities from their balance sheets, they are wildly over-stating assets and liabilities - if anything there is too much on their balance sheets, making them look much bigger than they really are (see Note G below). Here is the consolidated balance sheet of UK banks. I'll explain all the double counting in the notes:Notes:

A. The figure for loans to customers looks 'about right'. According to Credit Action, total residential mortgages and other household debts are £1,457 billion, plus add 50% for business lending. The Bank of England's Table C1.2 also shows £2,208 billion as at January 2010 (Excel).

B. I can't be bothered digging any deeper into this, but the 'securities for sale' (assets) are largely all the mortgage backed rubbish which they bought from other banks. Similarly each bank has repackaged its own mortgages and issued bonds secured thereon and/or the money they raised from bonds issued (liabilities) was lent on as mortgages, so the two B's are two halves of the same equation, and could in theory be netted off to very little indeed.

Some mortgages were genuinely 100% sold on and can be removed from the banks' balance sheets entirely, some were with recourse and so had to stay on. There is a theory that Northern Rock still included a lot of the former category on its balance sheet on the assumption that they were with recourse to the bank, whereas actually it should have excluded them.

C. The same logic applies to inter-bank lending, it's just two halves of the same equation. In this example, the amount borrowed from other banks is more than the amount lent to other banks, so I assume that the net figure of £121 billion is from non-UK banks.

D. The figures for derivatives looks big and scary, but I wouldn't worry too much about that either. This is because of accounting rules (see Note G).

To give a simple example of what this might be, let's imaginei. A UK importer who intends to buy €120,000s worth of goods from the Euro-zone each year, who is worried that sterling will fall even further against the Euro, which will increase his sterling costs. So he enters into a forward agreement at today's exchange rate of say 1.2. He commits to pay the bank £100,000 next year and in return the bank will give him €120,000.

ii. A UK exporter who intends to sell €120,000s worth of goods to the Euro-zone each year, who is worried that sterling will bounce back, so he enters into a forward agreement at today's exchange rate to pay the bank €120,000 next year and in return the bank will give him £100,000.

The bank takes a small margin deposit from each business to cover counter-party risk, and even if the bank didn't hedge these payments elsewhere, you can see it runs no currency risk whatsoever - it will simply take the €120,000 from the exporter and give it to the importer; the £100,000 goes in the other direction. The bank couldn't really care less what happens to the exchange rate and still earns its commission.

But, because of accounting rules, the bank has to include £100,000 as an asset and as a liability; and it also has to include €120,000 as an asset and a liability (at whatever the relevant exchange rate is).

E. This is the aftermath of Quantitative Easing and the bank bail outs. The government gave the banks a couple of hundred billion in soft loans, included under 'bonds' (liabilities), but told them they had to invest in 'quality assets' (government bonds, natch). Then it told them it would overpay slightly for those bonds if the banks were prepared to leave the sale proceeds on deposit with the Bank of England (which is just a form of government borrowing, but as it was just one form of borrowing replacing another, is of little relevance to the outside world).

The Treasury could quite easily get a couple of hundred billion back off the banks by netting off the two figures.

F. Besides the bail out money, the banks also owed the government £5 billion in tax, but have a deferred tax asset (i.e. they can offset past losses against future profits) of £20 billion. This can be thrown in the pot with E, seeing as the Bank of England and HM Revenue & Customs are all part of HM Treasury, which is in turn part of the UK government.

G. Accounting rules discourage you from netting off closely related assets and liabilities (such as the £200,000 assets and £200,000 liabilities disclosed under D above, which don't really exist), and banks are quite happy to go along with it, because it makes them look 'too big to fail'.

The only UK banks that were sorted out properly via debt-for-equity swaps, being broken up etc are the smaller ones such as Northern Rock or the Bradford & Bingley. The point is that this would work just as well for the big banks. Of course it would have to be controlled and managed so that savers and depositors don't panic, separate topic.

Friday, 29 October 2010

I can't embed a YouTube Clip to this, because there isn't one, but those of you who own Bob Dylan's absolutely dire/most excellent Xmas album* of last year can listen out for the choir doing a semi-tone upwards truck driver's gear change at 1 min 6 seconds into his hatchet job/idiosyncratic tribute to "O' Little Town Of Bethlehem".

* Is it dead serious? Is it a piss take? Or both or neither? Probably not even he knows.

1. OK. We assumed a catastrophic house price collapse of 50% and mass bankruptcies - or at least a debt jubilee - in Part 2 earlier today. The resulting consolidated balance sheet of the UK banking system is shown below, and as you can see, the consolidated total assets are still looking positive, albeit down from £873 billion to £36 billion.

2. The next Big Myth is that banks have to refinance £800 billion in bonds in the next few years (the actual figure of £800 billion is correct), and they are unlikely to get this so the government will have to throw another £800 billion of taxpayers' finest at them. Let's assume that the banks really can't afford to repay these loans (which does indeed seem impossible) but similarly that they can't borrow new money either.

So let's turn to our old friend: the debt-for-equity swap. As long as the underlying business has some value and will make more money by continuing under new ownership than it would from being broken up, a debt-for-equity swap is always the most viable option. As to all this Basel-style capital adequacy nonsense, see footnote D.

3. We've also got to show that neither shareholders nor bondholders are somehow being robbed, and that they are no worse off than before - as the balance sheet shows, there is no reason to assume that they would be. See footnotes below:

Footnotes:

A. The total value of all the bonds and shares was £723 billion before the hypothetical house price crash and balance sheet restructuring (see Part 2). For company law/insolvency law reasons, all the bonds would be converted into shares, and the former bondholders would acquire a majority of the issued shares. Twenty five 'new' shares would be issued to bondholders for every eleven 'old' shares (the shares would thereafter be identical, or 'rank pari passu' as they say in the trade).

B. Banks will be charging mortgage interest rates of 4.5% on average - a bit higher than now, but they don't need to worry about house prices crashing any more because they already have done. They'll still be paying a miserly 1.5% interest rate on deposits, and still have typical running costs of 1%, so their maintainable profits from the £1,800 billion average customer balances (deposits or loans) will be about £36 billion per annum. If you don't mind, I'll gloss over corporation tax liabilities and ignore any residual income from the £571 billion worth of 'securities for sale' and the income from their trading or investment banking divisions, which will net off to very little.

C. UK banks' price earnings ratios are currently between 9 and 30. Let's pencil in a price/earnings ratio of 20.1 (it might be higher; it might be lower), which we multiply by the £36 billion maintainable earnings to arrive at a total market capitalisation of £723 billion, which is exactly what is was before we started - this is hardly surprising as the markets have already factored in what will inevitably happen.

In other words, if you own £10,000's worth of UK bank bonds or 'old' shares today, once the dust has settled, you will end up owning about £10,000's worth of shares afterwards. What's not to like?

D. Of course, having shareholder's funds of £36 billion to support total assets of £2,442 billion is far too low. But we are looking at the bottom of the cycle. If we want UK banks to have a ratio of at least 6%, then they'll just have to stop paying dividends for three years, hey presto, job done. Under the circumstances, whether profits are paid out as dividends or retained in the business has relatively little impact, see also 'Berkshire Hathaway' or 'Microsoft'.

Or they can speed up this process by flogging off the 'securities for sale' for £571 billion (they may well get far more than that, of course), which reduces total assets to £1,871 billion - combined with three years' retained profits, they'd have a capital ratio of 10% which is more than adequate.

1. Having accepted that bonds are part-ownership and not a liability, and done all the netting off and contras from Part 1, we arrive at the more respectable balance sheet position shown below, with a healthy Basel ratio of 25% (i.e. £873 over £3,279). This deals with the first Big Myth, that UK banks are likely to go *pop* any second. I'll deal with the last Big Myth - that UK banks have to refinance or roll over £800 billion in bonds in the next few years - in part 3.

2. But let's now confront the second Big Myth - that we have to throw everything we can at propping up UK house prices, because if they fall by one single penny, the entire UK banking system will collapse. So let's do an extreme stress test and assume that UK house prices fall by half (which is unlikely to happen). I've pencilled in these write down percentages, and the resulting balance sheet will appear in Part 3 later today. Article continues below:3. To see how undramatic the effect of a 50% house price crash would be, we have to remember that not all mortgages are 100% loan to value, i.e. if your loan-to-value ratio is 50% and prices fell by half, you would still not be in negative equity.

4. According to Table 2.17 of the Bank of England's latest Financial Stability Report, 59% of UK residential mortgages had a loan-to-value ratio of less than 50%, so subject to certain assumptions - that every borrower in negative equity declared him or herself bankrupt and handed back the keys (again, highly unlikely to happen), the total losses would be in the region of 15% to 20%. The same sort of figure applies to lending on commercial properties, and there is plenty of non-land related lending. In my 'write down' column, I have assumed a write down/loss of 20%, i.e. at the higher end.

5. Heck knows what's buried in 'Securities for sale'. It'll be a mixture of stuff that is worth what they say it is, second hand mortgages worth 80% of their face value (see 4.) and other US-origin sub-prime stuff that might be worthless. This averages out to 60% of current market value, so let's write this lot down by 40%.

5. For good measure, let's write down banks' own fixed assets - which include their commercial premises and 'good will' - by 10%.

6. You can't 'write down' customer deposits or trade debts as this would be open fraud and politically impossible.

7. And we have to keep track of the market value of all the bank shares and bank bonds in existence. Market value of the shares is explained in Part 1. I've assumed that bank bonds are trading, on average, at 80p in the £. Therefore the total 'enterprise value' of UK banks is £723 billion - the object of this exercise is to show that neither bond nor shareholders would particularly lose out if house prices crashed AND/OR if UK government bail outs were to be halted and reversed.

1. One of the Big Myths put about by bankers and politicians is that 'banks are too big to fail', because if you add up all their balance sheet totals, you end up with a figure of £6,000 or £7,000 billion, which is four or five times the UK's GDP. This is because every bank owes all the other banks vast amounts of money, and because of accounting rules that force you to show closely related assets and liabilities (i.e. derivatives) gross, rather than netting them off to a small, manageable figure.

2. Another Big Myth is that if house prices fall, banks will somehow disappear in a puff of smoke and savers won't get their money back (let alone bondholders or shareholders), which I will deal with in Parts 2 and 3 of today's mini-series.

3. So I have printed off the balance sheets of the five largest UK banks (see footnotes) and done all the netting off for you, which gives a more realistic balance sheet total for the UK banking system of £3,602 billion (still more than twice GDP, but that figure can be whittled down further). Article continues below:

4. I trust it's obvious where all the QE money went - straight back back into the Bank of England!

5. This balance sheet total is still overstated, so I have proposed a couple of further contra entries:

a) The UK government has lent the banks a couple of hundred billion to bail them out, which is included in 'bonds' but it also holds a couple of hundred of billion of the banks' money at the Bank of England (so it has lent money and borrowed it back again). Then there's the deferred tax asset which I can't be bothered to explain. Let's net all these off to nothing.

b) According to their individual balance sheets, total UK bank borrowing from other banks is £359 billion and total UK bank lending to other banks is £238 billion, which I have already netted down to £121 billion. We can only assume that the net figure is borrowed from non-UK banks, so let's net that off with 'Securities for sale', which includes all the mortgage-backed bonds and rubbish from other banks, primarily from the USA, i.e. repay them with their own rubbish. Also known as 'doing an Iceland'.

I'll show the effect of these contras and also look at the impact of a house price crash in Part 2 later today,------------------------------Footnotes:

B. I didn't include Abbey, which is part of Santander, and of course Nationwide is a building society, not a bank. I only included the 53.7% of HSBC which relates to European operations but not smaller UK banks and building societies. By and large, the overs and unders will net off - Barclays has quite sizeable non-UK operations and what we get is a fair picture of the UK banking system as a whole.

C. There is of course no clear dividing line between 'customer deposits' and 'bonds', but a dividing line has to be drawn somewhere between true liabilities and ownership. For example, if you borrow £50,000 from your uncle to set up in business, and a year or two later you have also run up unpaid invoices of £50,000 it is up to the bankruptcy courts to decide that your uncle is part-owner of the business and that your suppliers are normal trade creditors.

D. I added up the market capitalisation of the four banks using Yahoo Finance's numbers to arrive at the market value of the shares. Nationwide doesn't have a market capitalisation, so I have assumed this to be £nil.

Our welfare system is so heinously complicated that it takes the Department of Work and Pensions months to work out how all the main benefits interact in order to publish their annual "Tax Benefit Model Tables".

The Tables for the year 2009-10 weren't published until 15 October 2009, and there's no sign of this year's version yet, even though the new rates and allowances have all been in force since 6 April 2010 or thereabouts.

Oct. 21 (Bloomberg)- Anglo Irish Bank Corp. offered to exchange 1.6 billion euros ($2.2 billion) of subordinated debt for new bonds at a rate of 20 cents on the euro as the nationalized lender seeks to generate capital... Repurchasing a liability such as a bond at a discount to face value generates a capital gain* that the purchaser can use to bolster its capital.

The Irish government pledged as much as 11.4 billion euros to support Anglo Irish on Sept. 30, on top of the 22.9 billion euros it has already pumped in since seizing the lender in January 2009. Its base-case calculation of the cost of the rescue, which involves keeping part of the lender alive while putting the remainder into runoff, is 29 billion euros.

The Anglo Irish rescue package will cost every man, woman and child in Ireland as much as 7,500 euros.

Of course, said bond holders are none too happy, but faced with these catastrophic losses (the inevitable aftermath of The Home-Owner-Ist decade), is it not reasonable to follow normal insolvency procedures and ask bond holders to take EUR 1.3 billion of the losses on the chin, which pales in comparison with the EUR 34.3 billion loss foisted on the long-suffering taxpayer?

* It's accounted for as a capital gain, but really it's a reduction in liabilities; the resulting gain forms part of shareholders' equity so it's yet another version of a debt-for-equity swap. In a normal debt-for-equity swap, the bonds are cancelled and bondholders are issued with shares instead, but there's nothing to stop them from selling their new bonds and buying shares, is there?

Wednesday, 27 October 2010

Up to a million people could be driven out of their homes* as a result of the Coalition's savage attack on the poor. A cap on housing benefit means low-income families will no longer be able to afford to stay in privately rented property in many areas...

Under changes announced by Chancellor George Osborne, housing benefit from April next year will be capped at £400 a week for a four-bedroom house, £340 for a three-bedroom property, £290 for two bedrooms and £250 for a one-bedroom property.

That still sounds far too high to me. But you can check for yourself at Rightmove and muck about with postcode, number of bedrooms and maximum monthly rent.** Geek points to anybody who can find a postcode without any eligible homes within a three-mile radius.

* As a land value taxer, I am so sick of hearing that. "Instead of having to pay income tax, people will have to cut their housing cloth according to their incomes" is more like it.

Eating bacon can damage sperm, men warned: Eating lots of saturated fats, such as those found in bacon, can have a damaging effect on men's sperm, new research suggests...

Ah right. "Such as those..." and not "which are exclusively". Let's stop right there, shall we, and tuck into some of this:And as regards the Global Anti Bacon Movement, eating bacon sure ain't as bad for 'reproductive health' as marrying your sister, is it?

An extract from the FT article (which should be read as it does for Will Hutton's credibility)

"The Work Foundation’s pension woes mirror the difficulties currently being experienced by many businesses. Uniq, the food maker formerly known as Unigate, this week proposed a radical “deficit for equity” swap to resolve a towering pension deficit."

(clicking on the headline will take you to the FT site - but you might need to register - this is the linkhttp://www.ft.com/cms/s/0/396bf3aa-ddcb-11df-8354-00144feabdc0.html )

Update: Or you can try Googling - Work Foundation bought out of insolvency(Thanks to a dearieme)

US house prices began falling again in August after the expiry of homebuyers' tax credits, a survey suggests. Prices were down 0.3% versus the previous month, on a seasonally-adjusted basis, according to the Case-Shiller index of 20 major US cities...

A tax credit for homebuyers expired in April, leading to a steep drop in home sales over the summer. That same effect now appears to be feeding into house price data, which are published with a two-month lag.

Fair enough.

1. That Homebuyer's Tax Credit was [up to] $8,000 for first time home buyers and $5,000 for repeat home buyers, a sort of negative Stamp Duty Land Tax. I've no idea how long 'chains' are in the USA, but let's call it three, so for each transaction, the total amount of the credit would be [up] to $18,000. Let's also not forget that the two nationalised lenders"own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion", and IIRC are responsible for about 80% of new lending.

2. It's quite reasonable to expect all these direct or indirect subsidies to lead to an increase in the number of buyers and movers, and thus the number of transactions and, most importantly, the prices paid, and most articles I've seen seem to take this as a given.

3. So would it not be fair to say that the value of these subsidies accrues mainly to people who are selling housing, rather than 'helping first time buyers onto the property ladder'? (Cue Dearieme's quote). What the first time buyer gains on the subsidy swing he loses on the price roundabout.

4. If that is true (which it is), is it not also fair to say that withdrawing all these subsidies would actually help first time buyers: prices would fall by the value of the subsidies, but on the other hand, they would have a smaller mortgage to pay off and a slightly lower income tax burden in future (all those subsidies have to be paid for, and the higher government debt will have to be paid off sooner or later)?

5. Once we've gone that far, is there any reason to assume that continually reducing the subsidies until they were negative, i.e. a tax on home ownership, would not affect first time buyers either, and in a subtle way, make them better off in future?

Tuesday, 26 October 2010

1. Your own particular skills and abilities, willingness to work hard, pure blind luck. These change over your lifetime and go or die with you.

2. Things you own because you have traded the product of your skills and abilities with those of others.

3. ‘Private’ land is clearly private in the sense of ‘not being open to the public’, but it only remains private because society largely respects the right to exclusive possession. So ‘private’ land is a social contract between the land ‘owner’ and society in general or ‘the state’ in particular. When you buy or rent land, you are paying for the benefits that arise under a contract with ‘the state’ and not for the output of the vendor’s skills and abilities (that would only apply to the buildings).

And from the longer version:

The owner of any site can do very, very little to increase or decrease the rental value of the site, apart from obtaining planning permission or entering into a restrictive covenant (both of which are ‘social contracts’).

Social Housing Minister Witterings alerted me to a nice bit of Home-Owner-Ist propaganda entitled We need house prices to go up over at ConHome. The author got a fair old kicking in the comments, and I posted it at HPC just for a giggle, where the kicking continued unabated.

To my surprise, the author really is the gift that keeps on digging. He posted the following response at HPC:

David T Breaker said...

Thanks for the link to my post and feedback. Always welcome. I would however like to make a few points which you seem to have missed;

1. I recognise house prices are above the "historic norm" of 5x average earnings; my argument is that this "norm" no longer applies due to the fall in other prices, which means more income is available for housing costs, and the rising population.

2. I recognise first time buyers would like lower prices; my argument is that the large deposits are the problem however, and these are caused by banks fearful of falling prices. When prices start to rise again the deposit requirement will drop.

3. Falling prices doesn't increase supply.

4. We do not want to build on our countryside!

To which I responded thusly:

1. This is Ricardo's Law of Rent all over again. [He acknowledges that] if the economy becomes more efficient, this does not primarily benefit workers or businesses [or even consumers], it merely serves to drive up house prices. So why bother working? You can make more money by buying land and watching it appreciate.

2. So no more "no more boom and bust" then, just more "boom" for ever? When house prices were low and stable (for a few brief years in mid-1990s or indeed in the 1950s and 1960s) there was no problem getting a decent 20% deposit together for FTBs, was there?

3. Falling prices will increase the supply of affordable housing. That's all FTB's are asking for. Or have I missed something? For sure, falling prices are bad for the economy, but trying to keep the bubble inflated is worse. The best thing we could do is a nice big crash, let 'em fall and then keep them low in future.

4. OK, either we want to increase supply (in which case he contradicts his own point 3, which suggests that an increase in supply is A Good Thing), or we want to prevent all new construction (which is A Good Thing if you are a Greenie or NIMBY). In any event, where on earth does he think that existing housing was built? Great Britain was once all forests, you know.

Comments in the Australian Daily Telegraph on the tsunami which hit Indonesia:

Wearing Weather of Sydney:Wow - our Earth is not happy ! The weather is crazy and out of whack. I'm glad the Aussies are ok.

Pat of nsw:Wow how lucky are they especially with how the Earth has decided its time to start shaking things up. What next as the Earth is definitely not happy with all the weird weather changes and earth quakes volcano's, so much for so skeptics for climate change. Hope all Aussies are safe and well.

Chunks of North Dullsville: "Our Earth is not happy"? You do realise that earthquakes area perfectly natural event that occur because the crust of the planet is made up of tectonic plates that move around over vast periods of time? The Earth isn't some sort of temperamental goddess, it's a planet.

"There is "no obvious limit" to the number of immigrants who could settle in the UK, the home secretary has said. David Blunkett agreed some people felt swamped by new arrivals, but said legal migrants brought economic benefits. He said Britain had always been "crowded", and the current net inflow of 172,000 a year was sustainable."

David Blunkett, 26 October 2010 (in Financial Times, Letters to the editor):

"Sir, ...The government has just announced that it intends to set up a cross-departmental identity fraud unit, targeting what it rightly describes as a growing problem. I welcome this initiative.

However, the paradox is the government’s decision not simply to do away with identity cards and the associated identity register (which would have given us, for the first time a clear idea of who is legitimately in the country and on what basis), but with second-generation biometrics for passports as well."

Right-wing authoritarian, Philip Booth (of the IEA, not to be confused with devoutly libertarian Phil Booth of No2ID), displays a surprising naïvety in his comments on Iain Duncan Smith's proposals for a Citizen's Pension:

There are problems with the current system, but sustainable reform is possible. The contributory principle should (1) be strengthened and the two state pensions merged into one. Individuals should (2) earn an entitlement to a fixed amount of pension each year when they pay their NICs with that fixed amount being indexed until retirement. Once pension is accrued it should (3) neither be added to nor taken away by the government.

The pensions of all the elderly would then be determined by the entitlements they earned throughout their working lives. If a particular generation wanted higher pensions, then that generation would pay for it with higher NICs. (4)

The problem with the proposed “citizens’ pension” is that the pension will be decided by parliament and not be dependent on contributions (5). No fewer than 43 per cent of active voters are aged 55 or above. The government will thus not do anything to undermine the financial position of the elderly. (6) A citizens’ pension will be forever increased under pressure from a greying electorate...(7)

The Lib Dems say they do not like the contributory approach because carers and the disabled might be left out. Such people would not pay NICs and so they would not get a state pension. But if it is desired to fix this problem, the solution is easy: the government just gives credits to such people; it happens now and the system works. (8)

1) He who says 'should' has just lost the argument.

2) And again.

3) Three strikes and you're out.

4) The state pension has always been 'pay as you go'. It's the simplest and cheapest way of doing it. The fact that people believe it to be 'contributory' is a separate issue. And any discussion of state pensions that ignores the Pension Credit is pointless.

5) Who decides on the age at which you qualify for a state pension? Who decides the level thereof and how it will be indexed? Who decides on the level of the Pensions Credit (which makes a mockery of the whole 'contributory principle')? Who decides the level of the super-tax on employmentNational Insurance contributions?? That wouldn't happen to be, er, the self-same Parliament, would it?

6) Sort-of-true. This pandering to the over-55s primarily manifests itself as Home-Owner-Ism, which is a far greater drag on the economy than the 5% of GDP we spend on state pensions and Pensions Credit.

7) Also sort-of-true. But if things were as simple as he said, by now the state pension would kick in at age 55 and be £300 per week. It clearly isn't, so there must be equal and opposite counter pressures from somewhere that decide how mean or generous the state pension system is.

8) If he approves of this approach, has he not just driven a horse and cart through his own argument?

Polly Toynbee, commenting on the cap on Housing Benefit and rent increases in social housing:

Do they know what they are doing? Are they incompetent bunglers or do they mean to clear low earners out of the country's prosperous districts? As some residents since time immemorial are driven away – with maybe a few picturesque pearly kings and queens among them – this will become a cut that brands this government. Perhaps they think nobody will notice the new ranks of rough sleepers...

This month people who lost their job have had their help with mortgage interest payments cut in half. Expect more arrears and repossessions. Next year housing association and council rents will rise from their present heavily subsidised rents to 80% of the market rent for new tenants – about £100 more a week. New social housing will no longer be available to the poorest, but only to those who can pay high rents.

1. Water off a duck's back, frankly, same old same old. You get exactly the same whining and moaning if you suggest replacing as many taxes as possible with Land Value Tax.

2. I try to be intellectually consistent: the best and most natural source of revenue for 'the State' is ground rents, whether that is income from Crown Estates; increasing rents in social housing to cover the location rent as well as just the bricks and mortar rent; or making owner-occupiers pay ground rent to 'the State' (i.e. Land Value Tax) rather than them paying it to the bank via their mortgage interest.

3. It's just that the traditional lefties are against social tenants having to pay for the value of what they get from 'society in general'; and traditional right-wingers (i.e. Home-Owner-Ists) are against owner-occupiers or landlords having to pay for the value of what they get from 'the State' (while both sides appear to be happy with the idea of workers and businesses paying 'rent' on the value of their own efforts and enterprise, i.e. income tax, VAT etc).

4. 'Society in general' is 'the State'.

5. Replacing the entire tax system with Land Value Tax would merely speed up the process whereby houses in desirable areas are acquired by people with high incomes and vice versa. Hardly a revolutionary vision, is it? And for lower income people, the blow would be greatly cushioned by the Citizen's Income they receive - in economic terms, they would be receiving ground rents from the high income people who have displaced them ('the State' collects the ground rents on behalf of 'society in general').

I'm interested in the topic of how long people are prepared to spend travelling to work each day, and (while different people have different pain thresholds) had always assumed that the overall average remained the same and had done for centuries. In other words, with faster travel speeds, people commute longer distances, but spend the same amount of time travelling.

So if people are spending more time commuting now than a hundred years ago, that's that theory out of the window. Actually the article explains that the speed of an average bus is slower than it was a hundred years ago, which is almost certainly true, but entirely irrelevant. For a start, in percentage terms far fewer people travel by bus nowadays. And so on.

I'm mildly relieved to see those results. The only two I've ever used for real are Money Supermarket (for car insurance) and U Switch (for changing gas and electric, about ten years ago) and I was perfectly happy with the outcome.------------------------------------Thanks to everybody who nominated somebody for this week's Fun Online Poll: "Who is your favourite flat chested celebrity?"

The deep-seated foreign fear of bears roaming Russia’s streets might be coming true – and authorities in the remote Komi Republic is issuing guidelines to fend off attacks.

Among the top tips, residents are told to look the bear in the eye and speak to it firmly. Turning your back on a hungry mammal is not recommended. If the bear attacks, it’s best to meet fire with fire, apparently by shouting loudly and maintaining that all important eye contact, according to AFP.

Translated; "It is important to follow a few basic ground rules with grazing cattle. Do not touch them, avoid direct eye contact and look out for signs of aggression, such as lowering heads or stamping with hooves. This will help avoid or prevent most attacks."

As to "not turning your back", I'd suggest the best advice when faced with aggressive cows is "run like hell". Unless you can run backwards, this inevitably entails "turning your back".

It's time to start a new Fun Online Poll. I was thinking of doing the next one on who our favourite flat chested celebrity is.

Those that spring to mind are KeiraKnightley, Natalie Portman (who are probably the same person) and Paris Hilton, i.e. those who are hot precisely because of, rather than despite, their all round flat-chestedness. Kate McCann would qualify but her claim to fame is murky, to say the least, and 'Kate Moss ten years ago' or 'Grace Jones twenty years ago' don't count.

The amount of tax-free income that savers can put into pensions has been sharply restricted by the government. The annual limit will be reduced from £255,000 to £50,000 in April...

The Treasury hopes the changes will eventually save it more than £4bn a year - which could be used to reduce the budget deficit...The coalition government began a consultation after the Labour government announced plans to gradually reduce the tax relief available on pension contributions for people earning more than £150,000 to just 20%, despite the fact that these people pay income tax of 50%...*

The government said that changing the allowance to £50,000 would affect 100,000 pension savers a year**, and 80% of those had incomes of more than £100,000 a year...

Mark Hoban, financial secretary to the Treasury, said the government had taken a "tough but fair" decision. "We have abandoned the previous government's complex proposals and developed a solution that will help to tackle the deficit but not hit those on low and moderate incomes," he said.

The total cost of the various tax reliefs for personal and employer pension contributions is around £34 billion per annum. The basic reason for giving tax relief for pensions contributions is to help alleviate poverty in old age by encouraging and enabling people to save for their own retirement.

The system of reliefs that has developed over the decades appears to have lost sight of these basic aims – 55% of the value of the tax reliefs now accrues to higher rate taxpayers - and the fact that the overall pool of investments in which pension funds and annuity providers can invest is limited...

UKIP concludes that tax relief can be far better focussed on alleviating poverty (rather than allowing already wealthy individuals to become even wealthier) if:

• The upper limit for tax relievable contributions were reduced from £235,000 to £10,000 per annum

• Tax relief were be harmonised at 20% of gross contributions (the same rate at which pensions will be taxed).

* UKIP didn't see the 50% tip top tax rate coming and, for the avoidance of doubt, proposed a flat income tax rate of 31% on all income (to replace current basic rate tax 20% and Employees NIC of 11%).

** Reality check: 'more than' £4 billion divided by 100,000 'pension savers' = 'more than' £40,000 per person per annum. Wouldn't it be better to scrap the tip top tax rate of 50%, which raises rather less than 'more than' £4 billion?

The state pension system is to be given the biggest shake-up since its inception more than 50 years ago. Ministers are planning a simplified payment which will see everyone receive the same amount – around £140 a week, far more than at present.

The proposal, to be detailed in a Green Paper before the end of the year, would benefit women and married couples. It would also end the indignity of means testing and, say coalition sources, will pay for itself, largely by reducing bureaucracy...

Work and Pensions Secretary Iain Duncan Smith and Pensions Minister Steve Webb are suggesting a new ‘single tier’ state pension which would replace all existing payments. If paid at the expected £140 a week, that would mean an income of £7,280 per year or £14,560 for a pensioner couple...

The payment would be based on citizenship or residency, with British citizens or anyone who has been living in Britain for a fixed number of years qualifying.

In summary, the current system is shambolic, with a complicated system of form filling, means testing and requirements to apply for benefits and assistance. Many older people find this process demeaning, complicated and some as a result fail to claim everything they are entitled to. This has the effect of worsening their economic situation. The current system clearly needs a radical overhaul.

UKIP therefore proposes a radical simplification. We feel that every pensioner aged 65 or over, whether single, widowed, married or cohabiting, should have the choice between:

• Continuing to claim their existing BSP/S2P (and various other minor benefits), and;

• Claiming a non-taxable, non-means tested “Citizen’s Pension” of at least £130 per week, equivalent to the current Pensions Credit level (plus value of free TV licence and Winter Fuel Allowance). A couple, who are both over 65, would be entitled to at least £260 per week.

• The important difference between the Citizen’s Pension and The Pension Credit will be its simplicity. It will not be means-tested and will be paid out at the higher of a) £130 per week; and b) the total of an individual’s existing taxpayer funded or public sector pensions (information which the Pensions Service and the various government departments should be able to compile relatively easily), so it will not be reduced if a pensioner (or their spouse or partner) has a private pension or other savings and investment income...

There has been some anger over the perception that recent arrivals to the UK are getting the same entitlements as people who have lived here all their lives. The Citizen’s Pension will therefore also be based on the length of Citizenship. The amount will be reduced pro rata if the claimant has not lived in the UK for forty years prior to retirement.

The measures announced in the comprehensive spending review are still being digested, but the Chancellor's decision to cut the social housing budget in England by more than 50 per cent has led to calls from lettings agents, landlords, brokers, lenders and charities for the Government to do more to increase supply and ensure buy-to-let funding is dramatically increased.

The private rental sector is being relied upon to support demand for social housing yet is itself in a far from healthy position. It is already struggling to match existing demand, and the buy-to-let market is virtually unrecognisable from its peak three years ago. In addition, changes to welfare rules could put existing landlords off letting to those receiving housing benefit.

Whether all the vested interests quoted in the article really believe any of this crap is open to debate, but none of it makes sense. For a start, the government is increasing rents for social housing and/or reducing the generosity of Housing Benefit paid to 'private' landlords, in order (ostensibly) to save money. It seems a bit daft to expect the government to start spending more money on exactly the group they just stopped subsidising quite so much.

Or try this analogy: the government decides there are too many unsafe cars on the road, and that each car has to have an MOT test every six months instead of every year. If you run a garage that does MOT tests, would you be rejoicing at all the extra custom, or bleating that you need subsidies from the government to train up more mechanics etc?

Saturday, 23 October 2010

Depending on your point of view, the plot of this film is either totally predictable; or it is so full of predictably unpredictable 'plot twists' that they all cancel each other out and it is indeed totally predictable.

It was OK though, all in all. The little girl liked it more than the boy did.

Highlight - the boss of Evil Bank making Dr/Mr Gru submit a cash flow forecast to justify giving him a loan for his next dastardly enterprise, and then passing on the idea - and the funds - to his son, Vector instead.

One report tells me that there are about 4 million social housing units in England. No, they're not all 3 bedders, but taking that average discount to market rent of about £200 a week that's....eek! That's £40 billion a year in subsidies. And yes, charging lower than market rent really is a subsidy, it's money foregone....

... I'm quite happy with the idea that we'll ameliorate some of the rougher edges of market outcomes. Subsidise, for example, those left grasping firmly the ordure stained end of the stick. But I still want us to be using markets as the pricing and allocation mechanisms: precisely so that we don't get these absurdities as we do with social housing, where we've a £40 billion subsidy that no one seems to even recognise, let alone acknowledge.

To which I responded:

Yes of course there are purely notional subsidies to social housing i.e. their rents only cover the rent for the bricks and mortar, they do not pay rent for the location value.

But it is inconsistent to look at the £40 billion annual subsidy accruing to 4 million households in social housing or housing association housing, without also looking at the [ballpark] £200 billion annual subsidy to owner occupiers, who do not pay for the location rent of the homes they occupy.

So by all means, hike social rents by £40 billion a year but only if you also start charging owner occupiers for the location rent.

And then think about all the taxes you could scrap with that extra £240 billion coming in - how about the messy little taxes - like council tax, stamp duty, inheritance tax, capital gains tax, TV licence fee - and a couple of the big bad ones - VAT and National Insurance?

Friday, 22 October 2010

Another one from RJ's list. There's a too-clever-for-its-own-good scale climbing exercise at about 3 minutes in, which ends badly at 3 minutes 11 seconds when they continue the song a tone higher than they started it. Nice costumes though.

Jill Britten, joint chair of Whitchurch Village Action Group, said: "It's all on green belt land. If it goes ahead, there will be no definition between Whitchurch and Stockwood – the area would just become one big suburb of Bristol. The overriding problem with this site is also the traffic. With 340 homes, you could have up to 700 cars and that doesn't take into account all the ancillary vehicles such as dustcarts, delivery vans and so on."

She said it would be much better to build new homes in or near places such as Midsomer Norton, Radstock or Peasedown St John where it would easier to absorb homes.

Here's a picture of those NIMBYs with The Hallowed Greenbelt behind them, stretching all the way to the horizon...Or if you want the aerial view...

... a passenger had smuggled the crocodile on to the plane – which was travelling from the capital, Kinshasa, to Bandundu on August 25 – in a sports bag. When the reptile escaped during the flight, it caused panic among the passengers and in the confusion they followed the flight attendants towards the cockpit, throwing the plane off-balance and causing it to crash into a house.

Travellers could increasingly be affected by flooding to parts of the ageing network, the bulk of the which was built before anyone had considered global warming. Lines cutting through the countryside with high banks either side of the track are particularly vulnerable to landslips, a report has warned, as are low-lying areas from flooding.

Makes a change from 'leaves on the line' or 'the wrong kind of snow', I suppose.

Thursday, 21 October 2010

A woman is recovering in hospital after having her thumb and part of one of her breasts chewed off when she was attacked by her pet zebra, according to reports...

Ms Mhidza told the New Zimbabwe website that her family had kept the zebra as a pet for a decade after taking it in as an orphaned foal and deciding to keep it alongside their herd of cattle. The creature had always been calm until it turned on its owner after she stepped in to stop it attacking a cow.

"We were shocked last week when the zebra bit one of the cows in the hind quarters as they were grazing," she said. "The cow bled profusely and later died. On Sunday last week, it attacked another cow. Instinctively, I threw a brick at it."

The zebra then abandoned the cow and charged at Ms Mhidza. Worried neighbours managed to scare the animal away after the incident. Wildlife officials later arrived at the scene and destroyed it.

Zimbabwe Parks and Wildlife Management spokeswoman Caroline Washaya-Moyo told New Zimbabwe it was not sensible to try to domesticate a wild animal.

‘Land’ receives payment for its services, but ‘land’ has no need of payment, so that payment is left on the table, so to speak. The question then is what in the world is to be done with that revenue? But we’ll get to that…

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The Council of Mortgage Lenders' shroud waving before the Comprehensive Spending Review was quite professionally done, wailing on about 'hard pressed buyers suffering during the recession', subtext: ensure that money keeps rolling in and that the banks' collateral doesn't fall in value.

The government was only too keen to continue with the other Home-Owner-Ist policy of transferring money from tax payers to 'hard pressed buyers' and hence to the banks and building societies, but methinks that the CML are getting a bit over confident. Instead of just thanking them politely, they have started making veiled threats:

The Council of Mortgage Lenders welcomes the extension of the temporary concession on support for mortgage interest announced today under the government's comprehensive spending review.

The £200,000 limit on mortgage size and the 13 week waiting period (down from 39 weeks) will now remain in place until January 2012. The CML trusts that the government will review the housing market conditions before that point and decide on whether further continuation would be appropriate.

Epic Fail.

They should have said 'jobs market conditions' or something. The official lie is that handing out money to recklessoverstretchedhard pressed borrowers is about helping the borrowers from preventing the 'spectre of repossession'; and not about propping up house prices and bailing out banks.

They were waffling on about the Comprehensive Spending Review on the radio this morning*, and it struck me that it might be rather good fun to refer to them as "Giddy's Axe", as a tribue to the Geddes' Axe spending cuts of the 1920s and because George Osborne's original name was Gideon.

I Googled the phrase and it didn't give me any hits, rather surprisingly.

* The debate seems to be over whether the Lib-Cons are actually planning cuts, or just a return to the underlying trend of growth in government spending since 1955? Even Stephanie Flanders of the BBC said that on telly yesterday, which she repeats on her blog here.

Tuesday, 19 October 2010

Mr Honest Citizen: "Is this about the kids' playground? That wasn't my little boy who did that!"

BHO: "Mr HC, we've noticed that you haven't been claiming Housing Benefit or Council Tax Benefit for years..."

Mr HC: "Well no, when the Mrs went back to work, we checked the forms and it seemed like we weren't entitled any more. Is there a problem? Should we have been claiming?"

BHO: "No, that's all fine. I hope you realise that the new government has decided there isn't enough social housing, so it's trying to encourage you to move into the private sector, or to become an owner occupier. What they're thinking of doing is increasing social rents from £280 a month to perhaps £585 a month."

Mr HC, horrified: "We haven't got that sort of money! What can we rent privately for £280 round here anyway?"

BHO: "The good news is that the new government also thinks that there is too much social housing and it wants to encourage home ownership, so it's going to crank up the Right To Buy scheme."

Mr HC: "Beg pardon, I didn't catch that - is there not enough or too much social housing?"

BHO; "Bit of both, really. But we're trying to sort it out by helping you onto the housing ladder."

Mr HC: "I'd love to own a house. Paying rent's dead money, isn't it? But there's no way I could afford to buy. What's my council house worth ? £100,000, something like that?"

BHO: "Mr HC, I have to inform you that as a long standing tenant, you'll be entitled to a fifty per cent discount."

Mr HC: "But I don't have £50,000 to spare either."

BHO: "Don't you worry about that. There's another scheme where the government gives you an interest free mortgage for a quarter of it, and gets you a low interest loan on the rest, that'll cost you about five per cent."

Mr HC; "I'm not very good with figures. How much would that all cost me?"

BHO, types a few figures on his calculator: "Oh, £37,500 at five per cent, divide by twelve... yup, that'll cost you about £156."

Mr HC: "So that's less than the rent we pay! Sweet. But... what if I lose my job? They've already had to let a couple of people go, I'm worried it'll happen to me as well. Who'll pay my mortgage then?"

BHO: "Don't you worry about that. If you lose your job you can apply for 'Support for Mortgage Interest', that'll cover most of it, you can still apply for your Council Tax Benefit."

Mr HC: "I'll have to talk to the Mrs about that - sorry she couldn't be here, she's picking up the kids from school. But tell me straight, where's the catch?"

BHO: "I'm buggered if I know, to be honest. It's just my job to tell your 'options'. Do you want to cut your rent in half and end up owning a house or not? Here's a leaflet, show that to your Mrs and here's a card with my telephone number and email. Can you show the next customer in when you leave. Thanks for dropping in."

More than 90,000 people have "inherited" taxpayer-subsidised council houses from their parents or family members, official figures have disclosed.

More than £9 billion of council housing has been transferred to those who may not have qualified for state help on the basis of their own circumstances, figures suggest.

The annual rent subsidy from taxpayers to those who have inherited the cheap tenancy deals is estimated to be worth more than £300 million...

Official figures indicate that the average council house tenant pays £280 a month in rent, compared with £565 in the private sector.

Firstly, there is no taxpayer subsidy. If these tenants are the 'better off poor' and are paying £3,360 a year, that more than covers the running costs, maintenance, insurance and so on UPDATE: as Adam Collyer points out in the comments, it also covers the notional interest cost on bricks and mortar of about £625 a year.

Secondly, what about the two million council houses they sold off? Let's just rephrase all that:

Up to two million people are living in "inherited" taxpayer-subsidised council houses, which they acquired at 70% discounts from local councils, official figures have disclosed.

More than £200 billion's worth of council housing (at current values) was transferred to those who would not have qualified for state help on the basis of their own circumstances, figures suggest.

The annual rent subsidy to those who have are living in ex-council houses under the Right to Buy deals is estimated to be worth nearly £7 billion£14 billion per annum*, and the loss to the taxpayer from Right To Buy was in the order of £140 billion**.

Official figures indicate that the average council house tenant pays £280 a month in rent, compared with £565 in the private sector.

* Two million households not paying £565 a month = £13,560 million. Add to that the hundreds of thousands that are now subsidised by Housing Benefit at £565 a month...

** Two million homes now worth £100,000 each sold at 70% discount = £140 billion. UPDATE: as Adam Collyer points out in the comments, they were originally sold off for about £15,000 - £20,000 each, so the loss to the taxpayer is more like £160 - £170 billion.

A concerted effort by borrowers, lenders, the government and money advice agencies has helped to keep mortgage arrears and possessions in check during the current economic downturn. But the 'safety net' providing support for home-owners in difficulty is neither complete, comprehensive nor consistently available to all those requiring help.

Despite pressures on government funding, we believe it is important to maintain support for borrowers in difficulty – and fill some of the existing holes in the safety net – to help contain mortgage arrears and possessions in the challenging times ahead. On the eve of the comprehensive spending review, we are therefore making a series of recommendations in conjunction with the housing charity Shelter to minimise the number of cases of possession.

Our proposals include:

* retaining the existing 13-week qualifying period and the current capital limit of £200,000 for people claiming support for mortgage interest (SMI), thereby helping to offset the damaging effects of the 40% cut earlier this month in the rate at which this benefit is paid to claimants;

* maintaining current funding of free debt advice, so that struggling borrowers can get good quality, reliable and impartial help when they need it during the current period of economic uncertainty; and

* retaining the existing mortgage rescue scheme, which provides an option to become tenants in their own home for those for whom owner-occupation is no longer sustainable, and has the spin-off benefit of encouraging borrowers in difficulty to seek out independent debt advice early.

It gets better and better...

... home-ownership will not be sustainable for everyone, particularly those who stretched themselves in the period before 2007 and were then caught out by the downturn in the economy and tougher credit conditions.

We believe the government should now:

* consider ways in which borrowers could be encouraged to consider voluntarily selling their property to avoid court action; and

* explore the future options for a new form of insurance, possibly jointly funded by borrowers, lenders and the government, covering vulnerable borrowers who are not currently protected by the safety net but who still aspire to become home-owners (this sort of targeted approach would be much better than the blunt instrument of the FSA’s current affordability proposals).

I'm struggling to identify any sort of "intellectual coherence", "logical consistency" or what we used to call "honesty" in Tory thinking, as evidenced here.

1. One the one hand, they say that 'the better off poor' should be eased out of social housing, basically by charging them higher rents, i.e. that if you are allocated a council house when you are down on your luck, and manage to get back on your feet, you get kicked out again.

2. That view sort-of-has-some-merit, but is only a sticking plaster because there ain't enough social housing. As we know, there ain't enough social housing because:

a) The Tories came up with the wizard wheeze of flogging off the nicer stuff to sitting tenants at half price (a policy which Labour continued with gay abandon).

b) They aren't building enough new stuff - and we note from the linked article that they intend to reduce the amount spent on building new council housing by more than half.

c) As it happens, part of the reason why there isn't enough money left to build more social housing is because they are spending it all on Housing Benefit to subsidise rents in the private sector, a large part of which is ex-council houses which the lucky tenants have since sold for massive profits to BTL landlords. So this was is a shit deal for potential social tenants as well as for the taxpayer; but a splendid deal for land speculators.

3. Returning to the Tories' flagship policy of flogging off the nicer council houses for less than half their value - and recent statements suggest that intend to continue with this - it was of course only the 'better off poor' who could take up this offer, so (even assuming they haven't since sold them to BTL landlords), it is exactly the people who the Tories now say shouldn't have 'a council house for life' who are in 'a council house for life' and who don't even have to pay rent any more, and seeing as council houses were sold off for about £20,000 on average in the 1980s, most of them won't be paying a mortgage any more either.

4. So the question is - do the Tories want to have 'the better off poor' in council housing or not? If 'yes', then their current policy is wrong; and if 'no', then their original policy was wrong. Or probably both are wrong anyway, just for slightly different reasons.